Earlier this year, the Court of Appeal granted leave to appeal from a decision of Flaux J in Shared Network Services v Nextiraone, on the basis that the case was a good vehicle to resolve an important question of law. Although there is no certainty as to whether this appeal will be heard, and if so, when, the question of law highlighted by the Court of Appeal is one of great significance for...
Indemnity clauses in intra-group asset transfers
The English Court of Appeal recently considered an interesting and important issue arising out of an indemnity clause in an agreement for a transfer of assets and liabilities between two wholly owned subsidiaries in a corporate group. Dealing with a scenario not uncommon in intra-group transfers of assets and liabilities, the Court of Appeal in Rust Consulting v PB [2012] EWCA Civ 1070 considers...
The interpretation of time limit clauses in contracts
A claimant approaches a court one day after the limitation* period expires, in the mistaken impression that the limitation period had in fact not expired. This limitation period is set by a clause in a contract that is by no means a model of certainty or clarity. The question is whether the suit is time-barred. In ENER-G Holdings plc v Hormell, the Court of Appeal (Longmore, LJ dissenting) held...
Guarantees and Performance Bonds
Payment obligations under commercial contracts are often secured by means of guarantees issued by banks, which guarantee the performance of the payment obligation by the buyer. For instance, if A and B enter into a contract whereby A agrees to sell B a ship for the price of $50 million, B’s bank may issue to a payment guarantee to A to secure the payment of this amount from B. In the...
Enforceability of side letters – a postscript
In an earlier post, we had discussed the decision of the English High Court in Barbudev v Eurocom on the issue of the enforceability of side letters. In April this year, the Court of Appeal upheld the ultimate decision of the High Court, departing however, from the reasoning adopted. As discussed in the earlier post, the key issue in the case was whether a side letter signed by the parties could...
Ostensible Authority and Estoppel
The Privy Council in Kelly v. Fraser, [2012] UKPC 25, recently revisited the issue of whether an agent can be said to have ostensible authority on the basis of his own representations. Mr. Fraser, the Respondent, became the CEO of Island Life Insurance Company on 1st February, 2000, and shortly after that became a member of the Salaried Staff Pension Plan (“SSP”) of the company. The SSP was...
Wrotham Park and the scope of the “hypothetical negotiation” measure of damages
Perhaps the most obvious instance of the sophistication of English commercial law is the range of remedies it has, depending on the precise nature of and tailored to each cause of action. The most common remedy is, of course, compensation for loss, which attempts to place the claimant in the position in which he would have been had the term (in the case of contract) not been breached; an award of...
Confidentiality Agreements in M&A Transactions: Lessons from Delaware
Background Amongst legal documents in an M&A transaction, the confidentiality agreement plays an important role, as it does in other types of investment transactions (such as private equity), especially when it involves a public listed company. There are two key aspects of interest in any confidentiality agreement, which are also often the bone of contention in negotiations: (i) the scope of...
The Implied Authority of a Managing Director
Does a managing director have implied authority to suspend the Chairman of the board of directors? This is a question the Court of Appeal considered in its recent judgment in James Butler v John Smith. The leading judgment was given by Arden LJ. The case is significant because it dealt not with the ostensible authority of an MD in relation to a third party (on which there is a plethora of...
Illegitimate pressure in economic duress
Traditionally, duress rendered a contract voidable only if it was physical duress (which involved a threat to the person or belongings of an individual), but following the decision of the Privy Council in Pao On v Lau Yiu Long, the concept of economic duress was also recognised. It is now fairly settled law that there are two essential ingredients for voiding a contract on grounds of economic...
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